UK construction rebounds 'strongly' thanks to housing boom

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
Britain's Prime Minister Boris Johnson visits the Conway Heathrow Asphalt & Recycling Plant construction site in west London, Saturday, Oct. 3, 2020. (AP Photo/Alberto Pezzali)
Britain's prime minister Boris Johnson as UK construction PMI came in at 56.8 for September, well above economists forecast of 54. Photo: Alberto Pezzali/AP

The UK’s construction sector gained momentum in September, according to a closely-watched private sector survey published on Tuesday.

IHS Markit’s construction sector PMI showed activity accelerated last month after a slowdown in August. The rise in business was driven by house building and pent-up demand for home improvements. Optimism in the construction sector hit a seven month high.

Construction PMI came in at 56.8 for September, well above economists forecast of 54.

PMIs — short for purchasing managers’ index — are surveys of business activity. The index is measured on a scale of 0 to 100, with anything above 50 signalling growth and anything below meaning contraction.

September’s figure shows a solid improvement on August’s reading of 54.6. August’s reading had undershot city forecasts.

“Following August's slowdown, growth in UK construction activity rebounded strongly in September,” said Eliot Kerr, an economist at IHS Markit. “There were faster increases in activity in both the housing and commercial sub-sectors, which more than offset a sharper decline in civil engineering work.

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“Forward-looking indicators point to a sustained rise in activity, with new work increasing at the quickest pace since before the lockdown and sentiment towards the 12-month outlook at its strongest for seven months.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helped compile the data, said the housing sector was the strongest part of the industry last month, “partially driven by residential-related services such as home improvements.”

Despite rebounding work and optimism, job losses continued in construction. IHS Markit said some staff were being let go as the government’s furlough scheme comes to an end.

“Government support schemes are winding down, so the bigger worry remains levels of job creation,” Brock said. “With another drop in employment numbers, vacancies were sparse and further redundancy schemes could be on the cards once this pent-up demand for work is satisfied.”

On Monday, PMI data showed slowing growth for the UK’s dominant service sector in September. However, services, which represent four fifth’s of the UK’s economic output, remained “resilient.”

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